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HomeMy WebLinkAbout98-79 - Adopting the Police Officer Home Buyer Assistance Program22 RESOLUTION NO. 98-79 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, ADOPTING THE POLICE OFFICER HOME BUYER ASSISTANCE PROGRAM. WHEREAS, violent crimes, burglaries, robberies, drug dealing, prostitution, and other criminal activities are so prevalent and substantial in some urban neighborhoods that they constitute a serious threat to the public health, safety, and welfare; and WHEREAS, the presence of peace officers who reside in urban neighborhoods can reduce criminal activities and decrease emergency response time; and WHEREAS, the City desires to encourage Costa Mesa police officers to live in the City of Costa Mesa (the "City") in order to deter criminal activities in residential neighborhoods and to decrease emergency response time; and WHEREAS, to accomplish its goal of attracting Costa Mesa police officers to live in the City, the City desires to provide down payment assistance loans to qualifying police officers to promote such home ownership opportunities; and WHEREAS, in the course of implementing the Program, the City must execute certain agreements and related documents; and WHEREAS, the City desires to authorize the City Manager of the City to execute certain agreements and such other documents referred to in such agreements in the course of implementing the Program; NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Costa Mesa does hereby resolve as follows: SECTION 1. The City Council hereby adopts the Police Officer Home Buyer Assistance Program as described in the Program Guidelines attached hereto as Exhibit "A" and incorporated herein by reference. SECTION 2. The City Council hereby directs the City Manager to implement the Program consistent with this Resolution and Exhibit "A", and to prepare or cause to be prepared the necessary documents to implement the Program, including without limitation, the loan documents between the City and each participant in the Program substantially in the form on file with the Redevelopment Agency, Housing and Community Development Division offices, and incorporated herein by reference. The City Manager may make such changes to the Guidelines and the loan documents that are technical in nature and necessary to carry out the Program. SECTION 3. The City Manager is hereby authorized to execute on behalf of the City any agreements pursuant to the Program providing for City assistance and such other documents pursuant to the provisions of such agreements. SECTION 4. The Deputy City Clerk may furnish copies of this Resolution as evidence of the authority of the City Manager to execute such agreements provided for in Section 3 hereof, and related documents on behalf of the City. PASSED AND ADOPTED this 14' day of September, 1998. Mayor of the City oMesa ATTEST: T_ Deputy City CI of the City of Costa Mesa STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF COSTA MESA ) I, MARY T. ELLIOTT, Deputy City Clerk and ex -officio Clerk of the City Council of the City of Costa Mesa, hereby certify that the above and foregoing Resolution No. 98-79 was duly and regularly passed and adopted by the said City Council at a special joint meeting of the City Council and Costa Mesa Redevelopment Agency, held on the 14"' day of September, 1998, by the following roll call vote: AYES: Buffa, Monahan, Erickson, Somers NOES: Cowan ABSENT: None ABSTAINING: None IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal of the City of Costa Mesa this 15". day of September, 1998. Deputygouncil y Clerk and ex -officio Clerk of the City of the City of Costa Mesa 1 23 24 REDEVELOPMENT AGENCY FOR THE CITY OF COSTA MESA HOME BUYER ASSISTANCE PROGRAM GUIDELINES I. INTRODUCTION EXHIBIT "A" The Costa Mesa Home Buyer Assistance Program (the "Program") has been established to encourage home ownership in the City of Costa Mesa by providing down payment assistance (the "Agency Loan") to eligible first time home buyers purchasing qualifying properties. The Program is designed to assist low to median income persons and families who, based on institutional underwriting criteria, are unable to qualify for and/or afford the necessary down payment to purchase a home without Agency financial assistance. Qualifying properties must be single family homes, condominiums or townhomes located within the City of Costa Mesa and purchased for owner occupancy at affordable housing cost. The Program is funded by the Redevelopment Agency for the City of Costa Mesa's Low and Moderate Income Housing Fund established by the Agency to increase, improve and preserve the community's supply of affordable housing. Agency Loan funds are combined with the funds of participating low to median income home buyers to enable such households to qualify for first mortgage financing and achieve affordable home ownership. The Program is implemented by the Agency's Program Administrator in cooperation with participating private institutional lender(s). The basic structure of Program assistance is as follows: The First Trust Deed Loan. Participating home buyers must qualify for a fixed- rate level -payment first mortgage loan with a private institutional lender approved by the Agency. The Agency Loan. The Agency Loan will be provided pursuant to the terms and conditions of the Agency's standard form Loan Agreement and shall be evidenced by a promissory note and secured by a second deed of trust. During the first ten (10) years of the Agency Loan, no interest shall accrue and no payments will be due. Commencing in year eleven (11) through to the thirtieth (30`h) anniversary of the date of the Agency Loan, interest will accrue at the rate of five percent (5%) per annum and fully amortized monthly payments of principal and interest will be due. The entire Agency Loan amount will be due and payable upon sale, transfer or default. Affordable Housing Resale Requirements. The Agency desires that properties purchased with Program assistance remain part of the community's affordable housing stock available to successive low to median income home buyers at an affordable housing cost. If, during the first ten (10) years of the Agency Loan, properties are sold in excess of affordable housing cost to persons or families whose income exceeds one hundred percent (100%) of Orange County area AgencyGu i del ines5-4003.007 Exhibit "A" Resolution No. 98-79 Page 1 of 13 09/03/98 1 median income and/or the Agency Loan is accelerated because of default, the participant shall pay to the Agency (in addition to principal repayment) a percentage share of the appreciation in the value of the property based upon the proportionate share of the Agency Loan to the original purchase price. II. ELIGIBILITY CRITERIA A. ELIGIBLE PARTICIPANTS 1. Income Limits In order to qualify for Program assistance, an applicant's total combined gross household income cannot exceed one hundred percent (100%) of area median income for Orange County adjusted for family size as set forth in Exhibit "A" attached hereto. Income limits are published by the California Department of Housing and Community Development and . are adjusted annually. Gross household income shall be calculated in accordance with Section 6914 of Title 25 of the California Code of Regulations as set forth in Exhibit "B" attached hereto. 2. First Time Home Buyer Income eligible households who have not owned a present ownership interest in real property during the last three (3) years (unless relocated by the Redevelopment Agency as part of a redevelopment project) may participate in the Program. (A mobile home not affixed to a permanent foundation is not considered residential property). 3. Liquid Assets Household assets cannot exceed the greater of (i) the combined total of participant's downpayment and estimated closing costs plus six (6) months housing costs plus $5,000, or (ii) the combined total of participant's downpayment and estimated closing costs plus $10,000. Household assets shall be calculated in accordance with Section 6914(a) of Title 25 of the California Code of Regulations as set forth in Exhibit "B" attached hereto. 4. Legal Residency Program participants must be legally residing in the United States. 5. General Eligibility No member of the governing board of the City or the Redevelopment Agency and no other official employee or agent of the City or Agency who exercises any policy -decision making function in connection with the Program shall directly or indirectly be eligible for Program assistance. AgencyGuide I ines5-4003.007 1 Exhibit "A" Resolution No. 98-79 Page 2 of 13 09/03/98 25 26 6. Non -Participation in City Program Participants receiving an Agency Loan under participate in the City of Costa Mesa Police Program. B. ELIGIBLE PROPERTY 1. Location the Program are ineligible to Officer Home Buyer Assistance Program assistance will be available to purchase at an affordable housing cost single-family detached homes, condominiums and town homes within the City of Costa Mesa (excluding unincorporated areas). 2. Property Condition All properties must be inspected by an independent third party inspector at buyer's or seller's expense. The condition of the property as reported by such inspector must satisfy the standards of the institutional lender funding the first trust deed loan. In addition, any serious code violations or other health and safety deficiencies reported by such inspector must be corrected as a condition precedent to funding the Agency Loan. 3. Purchase Price The maximum purchase price for eligible properties shall be adjusted periodically to correspond to the Fannie Mae conforming mortgage limit. (As of January 1998, the maximum purchase price is $227,150.) In addition, the purchase price cannot exceed affordable housing cost. AFFORDABLE HOUSING COST California Redevelopment Law establishes the maximum allowable amount qualified participants may pay for housing related expenses (including principal, interest, taxes, insurance, homeowner association dues, and a reasonable utility allowance). Affordable housing cost is generally defined as a percentage of area median income for each of three eligible income categories. Very Low Income Household. Maximum housing costs cannot exceed thirty percent (30%) times fifty percent (50%) of the area median income adjusted for family size appropriate for the unit. Lower Income Household. Maximum housing costs cannot exceed thirty percent (30%) times seventy percent (70%) of the area median income adjusted for family size appropriate for the unit. AgencyGu idel Ines 5-0003.007 Exhibit "A" Resolution No. 98-79 Page 3 of 13 09/03/98 1 1 1 Moderate to Median Income Household. Minimum housing cost cannot be less than twenty-eight (28%) of the gross income of the household nor exceed the product of thirty-five percent (35%) times one hundred ten percent (110%) of area median income adjusted for family size appropriate for the unit. "Adjusted for family size appropriate to the unit" means the following: Studio = One person household One bedroom = Two person household Two bedrooms = Three person household Three bedrooms = Four person household Four bedrooms = Five person household IV. COVENANTS AND RESTRICTIONS Agency Loans are made subject to certain covenants, conditions and restrictions, including maintenance, criminal activity and affordability covenants that will be recorded against properties purchased with Program funds. A. Maintenance/Criminal Activity Covenants Maintenance/criminal activity covenants require the home buyer to maintain the property and the improvements in good physical condition and free from gang or drug-related activities or from other felonious criminal activity or public nuisance. These covenants run for the term of the Agency Loan. B. Occupancy Covenant Agency Loans require Program participants to own and occupy the property as their principal residence. Program participants shall be required to submit an annual affidavit of occupancy. C. Afford ability/Resale Restriction and Appreciation Share During the first ten years of the Agency Loan, participants may sell the property only to low to median income home buyers at an affordable housing cost. Participants may "buy- out" of such covenants and rent the property without restriction or sell the property to a buyer who does not qualify as a low or median income household and/or at a purchase price that exceeds affordable housing cost, so long as the participant pays a percentage share of the appreciation in the property (if any) to the Redevelopment Agency. The percentage share of the appreciation in the value of the property shall be determined by the proportionate share of the Agency Loan to the original purchase price in accordance with the following formula: (Agency Loan amount/original purchase price) x (sales price - purchase price). For example: if the amount of the Agency Loan equals $30,000 and the Program participant paid $200,000 for the home, then upon early repayment of the Agency Loan, the AgencyGuidel ines5AO03.007 1 Exhibit "A" Resolution No. 98-79 Page 4 of 13 09/03/98 2'7 Redevelopment Agency shall receive a share of the appreciation equal to fifteen percent (15%) x (Sales Price minus $200,000). No share in appreciation shall be due and payable in the event of sale to an income eligible person or family at affordable housing cost. V. FINANCING A. Minimum Downpayment Contribution By Participant All participating households must contribute a down payment of not less than five percent (5%) of the purchase price of the property, plus closing costs. The household's minimum five percent (5%) downpayment shall not be derived from the proceeds of a loan or a gift. The availability of funds must be evidenced by a checking or savings account statement. B. First Deed of Trust Program participants must obtain first trust deed financing from a private lending institution approved by the Agency. The first mortgage must be a 30 -year fixed-rate, level payment mortgage. The lender will determine the amount and terms of the first mortgage based on its own underwriting criteria. The financial criteria used by the institutional lender may be different and possibly more stringent than that used by the Agency. C. Second Deed of Trust (Agency Loan) 1. Maximum Loan Amount. The Agency Loan shall not exceed the lesser of $35,000 or that amount which when combined with the participating household's down payment equals 20% of the purchase price. In order to allow households meeting all other eligibility criteria to participate in the Program, the Program Administrator, with approval of the Agency, may permit the Agency Loan to finance all or a portion of the nonrecurring closing costs, subject to the approval by the first trust deed lender and so long as the Agency's maximum loan amount does not exceed $35,000. 2. Interest Rate. Except in the event of default, the Agency Loan shall accrue zero interest during the initial ten (10) -year deferral period with interest at the rate of five percent (5%) per year commencing in year 11. 3. Repayment. Except in the event of default, repayment of the Agency Loan is fully deferred for the ten (10) year affordability period. Monthly amortized payments based on a twenty (20) -year amortization schedule shall commence in the eleventh (II") year and be fully repaid on the thirtieth (30") anniversary of the Agency Loan. Notwithstanding the foregoing, the entire principal balance and all interest accrued thereon, if any, shall be immediately due and payable upon sale or transfer of the property or default by the participant of the terms and conditions of the Agency Loan. The Agency Loan is not assumable. AgencyGuidel ines5-4003.007 Exhibit "A" Resolution No. 98-79 Page 5 of 13 09/03/98 1 3. Default. Failure to occupy the property as the participant's principal residence and/or defaults in payments on the first mortgage, property taxes and/or hazard insurance constitute a default of the Agency Loan and acceleration thereof and may result in foreclosure. Exception: Participants may request temporary waiver of the principal residence requirement in situations involving extreme hardship as determined by the Program Administrator and approved by the Agency. Extreme hardship may consist of a transfer of career location, loss of job or unexpected expenses which force a move to a less expensive arrangement or other events of this nature. However, rental of the property shall be prohibited without the express written consent of the Program Administrator. If allowed, rental shall be permitted only to low or median income persons at affordable rent depending upon the income category of the participant, the participant's monthly housing cost and applicable market rents. 4. Refinancing, Resale and Subordination Refinancing of the first trust deed will be permitted only upon written approval by the Program Administrator and the Agency and only when the outstanding indebtedness is not increased (except by the amount of reasonable closing costs as determined by the Program Administrator). In all other cases, refinancing shall be allowed only where the Program participant will repay the Agency Loan in full together with interest thereon, if any, plus an appreciation share, if applicable, as specified in the Agency Loan documents. An appraisal by an Agency approved appraiser must be conducted, at the owner's expense, to establish the market rate value of the property. This will be used in determining the amount of appreciation share to be paid to the Agency. Properties acquired with Program funds shall not be sold for less than the sum of the existing liens, encumbrances, and interest, including property tax liability, without the express written consent of the Agency. The Agency Loan will be subordinate to the private institutional lender's first mortgage. The Agency will not subordinate to a first deed of trust that has a variable interest rate or any negative amortization associated with it. The Redevelopment Agency will not subordinate below second position. VI. VIOLATIONS/LIQUIDATED DAMAGES A special provision for liquidated damages shall be invoked if the Program participant willfully and knowingly makes a false statement or representation, or knowingly fails to disclose a material fact for the purpose of qualifying for the Program, or, in completing certifications, affidavits, or recertification documents or, fails to occupy the property and immediately seek to cure. AgencyGuidelines5-4003.007 1 Exhibit "A" Resolution No. 98-79 Page 6 of 13 09/03/98 29 30 VII. PROGRAM IMPLEMENTATION A. Home Buyer Seminars and Pre -Qualification Persons interested in participating in the Program will be required to attend an Agency sponsored home buyer seminar. The seminars will be aimed at describing the home buying process and the Program eligibility criteria, requirements, guidelines and procedures. Pre -Qualification Checklists will be available for interested persons at each seminar. Only persons attending the seminars will be eligible to complete a Pre -qualification Checklist and apply to participate in the Program. The Agency will review all Pre -Qualification Checklists submitted by the established deadline and will notify all persons in writing of their eligibility or ineligibility. During the first year of Program implementation (and in subsequent years as determined by the Agency) eligible persons will be invited to participate in a lottery to determine the priority of application processing and Agency Loan funding. Depending on the availability of Program funds and the anticipated number of Agency Loans that may be funded, the top lottery applicants will be issued a Certificate of Eligibility. In the absence of a lottery and/or a home buyer seminar, the Agency will issue Certificates of Eligibility on a first- come first-served basis to interested persons. Certificate holders must enter into escrow for the purchase of an eligible property within sixty (60) days of the date of the Certificate. B. Application/Underwriting /Funding Pre -qualified applicants must secure first mortgage financing and submit a complete Program application to the Program Administrator for an Agency Loan. Each application will reflect the time and date received and will be processed on a first-come first-served basis. Only complete applications will be evaluated. All information and data on the application shall be verified. The application, together with other materials relating to eligibility will be maintained in an active file for each applicant. Applicants shall be required to provide federal and state income tax returns for the previous three years and verification of current gross income to document eligibility for the Program. If a participating lender approves the first trust deed loan and the applicant is able to purchase an eligible property at an affordable housing cost, the Agency will conduct a final review of the Agency Loan package to ensure compliance with Program requirements. Upon final approval by the Agency, the Agency will prepare Agency Loan documents and submit Program funds into escrow. Applicant(s) should not make offers on homes contingent on Program assistance until they receive a Certificate of Eligibility. Final approval to participate in the Program is subject to the satisfaction of all required conditions. A minimum 30 -day escrow is required for all Agency Loans. AgencyGuidel ines5-4003.007 Exhibit "A" Resolution No. 98-79 Page 7 of 13 09/03/98 1 1 L 1 1998 INCOME LIMITS' Income limits for Orange County pursuant to Section 6932 of Title 25 of the California Code of Regulations; Number Of Persons In Family Standard 1 2 3 4 5 6 7 8 Very Low $23050 $26300 $29600 $32900 $35550 $38150 $40800 $43450 Income Lower' $31700 $36250 $40750 $45300 $48900 $52550 $56150 $59800 Income Median $46050 $52650 $59200 $65800 $71050 $76350 $81600 $86850 Income i Income limits effective January 1998 and are adjusted annually. ' Due to the methodology used by the United States Department of Housing and Urban Development in calculating Lower Income limits, the actual maximum income for Lower Income Households in Orange County is generally less than 80% of area median income because a national maximum or cap is applied. The cap is the national median family income ($45,300 for a 4 -person household in 1998). AgencyGuidel ines5-4003.007 Exhibit "A" Resolution No. 98-79 Page 8 of 13 08/26/98 31. �2 DETERMINATION OF GROSS HOUSEHOLD INCOME Gross household income shall be calculated in accordance with Section 6914 of Title 25 of the California Code of Regulations and as generally set forth herein. "Gross income" shall mean the anticipated income of a person or family for the 12 -month period following the date of determination of income. If the circumstances are such that it is not reasonably feasible to anticipate a level of income over a 12 -month period may be used subject to a redetermination at the end of such period. "Income" shall consist of the following: (a) Except as provided in subdivision (b), 'all payments from all sources received by the family head (even if temporarily absent) and each additional member of the household who is not a minor and who share the same dwelling unit or share in the ownership of the unit, whether in cash or in kind, shall be included in the annual income of a family. Income shall include, but not be limited to: (1) The gross amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips, and bonuses; (2) The net income from operation of a business or profession, or from rental of real or personal property (for this purpose, expenditures for business expansion or amortization of capital indebtedness shall not be deducted to determine the net income from a business); (3) Interest and dividends; (4) The full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts; (5) Payment in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay, subject to (b)(3)., below (NOTE: Such payments may be excluded by the lending institution providing the first mortgage for purposes of underwriting, but shall be included in eligibility determinations for this Program); (6) Public assistance; if the public assistance payment includes an amount specifically designated for shelter and utilities which is subject to adjustment by the public assistance agency in accordance with the actual cost of shelter and utilities, the amount of public assistance income to be included as income shall consist of: A. The amount of the allowance or grant exclusive of the amount specifically designated for shelter and utilities, plus AgencyGuide ines5-0003.007 08/26/98 1 Exhibit "A" Resolution No. 98-79 Page 9 of 13 B. The maximum amount which the public assistance agency could in fact allow for the family for shelter and utilities; (7) Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from persons not residing in the dwelling; (8) All regular pay, special pay, and allowances of a member of the Armed Forces(whether or not living in the dwelling) who is head of the family, spouse, or other person whose dependents are residing in the unit subject to 2.e., below; Where the applicant household has net family assets in excess of $5000, income shall include the actual amount of income, if any, derived from all of the net family assets or 10 percent of the value of all such assets, whichever is greater. For purposes of the Program, the following shall be considered net family assets: (1) cash savings; (2) marketable securities, stocks, bonds, and other forms of capital investment, including tax exempt securities other than Individual Retirement or KEOGH plans; (3) inheritance, lump -sum insurance payments, already received; (4) settlements for personal or property damage already received; (5) equity in real property other than household's full-time residence; and (6) other personal property which is readily convertible into cash, exclusive of the value of necessary items such as ordinary household effects, including furniture, fixtures, and automobiles used for personal use. (b) The following shall not be considered as income: (1) casual, sporadic, or irregular gifts; (2) amounts that are specifically for, or in reimbursement of, the cost of medical expenses; (3) lump -sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker's compensation), capital gains, and settlement for personal or property losses; (4) amounts of educational scholarships paid directly to the student or to the educational institution, and amounts paid by the government to veterans for use in meeting the costs of tuition, fees, books, and equipment; any amounts of such AgencyGuidel ines54003.007 1 Exhibit "A" Resolution No. 98-79 Page 10 of 13 08/26/98 3s 34 scholarships, or payments to veterans not used for the above purposes of which are available for subsistence are to be included in income; (5) special pay to a serviceman head of household away from home and exposed to hostile fire; (6) relocation payments made pursuant to federal, state, or local relocation law; (7) foster child care payments; (8) the value of coupon allotments for the purchase of food pursuant to the Food Stamp Act of 1964 which is in excess of the amount actually charged the eligible household; (9) payments received pursuant to participation in the following volunteer programs under the ACTION Agency: A. National Volunteer Antipoverty Programs which include VISTA, Service Learning Programs and Special Volunteer Programs. B. National Older American Volunteer Programs for persons aged 60 and over which include Retired Senior Volunteer Programs, Foster Grandparent Program, Older American Community Services Program, and National Volunteer Program to Assist Small Business Experience, Service Corps of Retired Executive (SCORE) and Active Corps of Executives (ACE). AgencyGuidel ines5-4003.007 Exhibit "A" Resolution No. 98-79 Page 11 of 13 08!26/98 1 1 POLICE OFFICER ASSISTANCE ADDENDUM TO COSTA MESA HOME BUYER ASSISTANCE PROGRAM GUIDELINES INTRODUCTION The purpose of the Police Officer Assistance component of the Costa Mesa Home Buyer Assistance Program (the "Program") is to encourage Costa Mesa police officers to live in the City of Costa Mesa by providing affordable home ownership opportunities. The presence of police officers in residential neighborhoods can reduce criminal activities as well as decrease emergency response time. Under the Police Officer Assistance component, all the terms and conditions of the Home Buyer Assistance Program apply; however, up to Ten Thousand Dollars ($10,000.00) of the Agency Loan to eligible police officers may be forgiven over a ten-year period based upon ongoing compliance with Program requirements. II. ELIGIBILITY CRITERIA Applicants for an Agency Loan under the Police Officer Assistance component of the Program must: 1) Meet all eligibility criteria for participation in the Program, including (without limitation) be a first time home buyer and have a gross household income not exceeding 100% of the Orange County area median income. 2) Be a full time (non -probationary) Costa Mesa police officer in any sworn classification. III. AGENCY LOAN TERMS During the ten-year affordability period during which no interest accrues and no payments are due on the Agency Loan, $1,000 per year shall be credited against the outstanding principal balance of the Agency Loan so long as the participating police officer continuously complies with all of the terms and conditions of the Program and so long as he or she remains an active full-time Costa Mesa police officer in a sworn classification. Credits shall be calculated on an annual basis only without any prorated credit or reduction for less than a full year of compliance and eligibility. The cumulative total amount of the credits shall not exceed $10,000.00. Except as provided hereinbelow, in the event the participating police officer is terminated or otherwise ceases to be employed as a full time Costa Mesa police officer in any sworn classification during the ten-year affordability period, the Addcndum3.4003.007 1 Exhibit "A" Resolution No. 98-79 Page 12 of 13 09/03/98 kS 0s participating police officer forfeits eligibility for the annual credit. If, upon separation from employment, the participating police officer is otherwise in compliance with the terms and conditions of the Program, then the .outstanding principal balance of the Agency Loan as of the date of separation from employment will continue to be deferred without interest until the tenth anniversary date of the Agency Loan. Notwithstanding the foregoing, in the event the participating police officer is no longer employed as a full time police officer due solely to an industrial disability, including death in the line of duty, such officer (or his or her heirs) shall not forfeit eligibility for the annual credit so long as the officer (or his or her heirs) continues to comply with the other terms and conditions of the Agency Loan. Commencing in year eleven of all Agency Loans, interest at the rate of 5% per annum shall commence to accrue on the outstanding principal balance of the Agency Loan and the participant will be required to make monthly amortized payments to the Agency in accordance with the Agency Loan documents. Such payments will be made through automatic payroll deductions so long as the participating police officer is employed by the City. In the event of sale or transfer of the property or other default by the participating police officer any time during the term of the Agency Loan, the entire principal balance of the Agency Loan and all interest accrued thereon, if any, shall be immediately due and payable. IV. TAX CONSEQUENCES The annual credit against principal that reduces the repayment obligation of the Agency Loan may have federal or state income tax or other tax consequences to the participating police officer. Each participant should consult his/her own tax advisor or attorney concerning such tax consequences. Neither the Agency nor any officer, employee or agent thereof makes any representations regarding the taxability or other tax consequences of the Agency Loan, the annual credit against principal, or any other matters relating to the Agency Loan. Addcndum3.4003.007 Exhibit "A" Resolution No. 98-79 Page 13 of 13 09/03/98 1